As we're gearing up for our second group challenge, we thought it'd be helpful to give you an overview of some of the best tools you can use to track your spending.
But first — a short discussion on why tracking your expenses is vital in the first place.
Why Tracking Your Expenses is Important
Having a record of how you're spending your money helps you understand your spending habits.
You may think that you're “not over-spending” on food and groceries. But how much are you spending if you order take-out 5 times a week?
And there could be some things you gloss over. A $10 monthly charge might not seem much. But if you're spending several hundreds a year in miscellaneous “recurring fee” costs (on memberships, magazines, or subscriptions), maybe there's something better you could put those dollars toward.
Financial health is similar to physical health, in the sense that you need to be aware and proactive of the situation.
The more you track, the more your awareness will improve. It will help you know what you can afford after knowing what you make and spend.
David Cain writes how the simple process of tracking has amplified his personal growth:
I’ve spent my entire adult life experimenting with self-improvement campaigns of all sorts, and nothing has worked better than tracking alone. Just recording the numbers—without striving to change anything about what you’re tracking—almost always creates a sustainable, healthy transition to a better way of doing things.
Justin and His 7-Year Tracking Exercise
If you think that tracking where your money goes for 30 days is tedious, wait till you hear about Justin, who tracked every penny for almost 7 years!
While Justin enjoyed how tracking helped him to get a strong picture of his overall financial health every month and year, he had several other realizations when he studied the data.
Some of the surprises he discovered include:
- How living with roommates didn't end up saving him a ton of money
- How much he really spent on gifts as a single person vs. when in a relationship
- If his health insurance was worth it…or not
- That playing the lottery makes sense on a small scale, and why
You might discover your own realizations through tracking your expenses. Wouldn't it be interesting to find out?
Listen to Justin narrate his 7-year money tracking article on Episode 255 of Optimal Living Daily.
If you're a new listener, click here to learn more about our podcasts!
Overview of Expense Tracker Apps
Here are some apps and tools that you might find handy to track your spending.
1. YNAB (You Need A Budget)
YNAB Might Be Best For You If: You want to get more specific and accurate with your tracking and budgeting.
YNAB (pronounced “why-nab”) was launched in 2004 and is an award-winning personal budgeting software.
The dashboard has a friendly interface and is well designed.
Justin personally uses YNAB because of the comprehensive ease of keeping track of the financial data.
“With YNAB alone, because I'm tracking everything, my entire tax preparation for the year is always complete. I just need to export it to a spreadsheet and send it to my accountant. After using Excel for years, I switched to YNAB because it saves so much time. One really cool feature is if you use the app and allow the app to access location, it will auto-fill most of the information for you.”
For example, if you tend to visit the same restaurants, gas stations, etc., if you use YNAB while you're there, the next time you enter a transaction from that location, YNAB will automatically populate the same payment method and category. All you have to do is enter in the amount, saving lots of time over the long-run, and making adding transactions a breeze.
Recurring payments like utilities, internet, and rent will also automatically populate categories for you, so you simply have to approve them instead of typing them manually.
While YNAB is not free (it costs $6.99/month, billed annually at $83.99), many of its users find that it's worth every cent. Plus, the founders send a great series of emails and prompts to ensure you get the most out of the app!
Optimal Living Daily listeners get an extended trial when signing up here. This is a perfect amount of time to try it out, and great for our 30 day challenge.
Here are some comments on YNAB from OLD podcast listeners:
“I have found YNAB to be transformational in my finances. Good luck with whatever you choose 🙂 xx”
“Been on YNAB for a month now and all I can say is ‘Wow!' It has made creating a budget and actually sticking to it much easier AND convenient. I like that I tell my money what to do and not the other way around, as I can now see where the money is actually going. YNAB offers short how-to webinars, videos, and a wonderful and helpful YNAB community Facebook page. Although money is tight, due to the debt mess I got myself into, this was the first month I didn't stress so much about money. I plan to subscribe!”
– Dawn (email from OLD podcast listener)
EveryDollar Might Be Best For You If: You're a big fan of Dave Ramsey, and want guidance through his seven “baby steps” with regard to budgeting.
If you follow Dave Ramsey and his financial advice, you'll enjoy using EveryDollar.
It's suitable if you're just starting to budget your finances and are not focused on wealth building or investing just yet.
You need to get a paid subscription if you'd like to sync your bank accounts. In the free version, you need to manually track your transactions and cannot sync your bank and credit card details. If you want tracking to feel less manual, YNAB is likely the way to go.
3. Personal Capital
Personal Capital Might Be Best For You If: You have a bend toward investments and have large assets to manage.
Personal Capital is based in San Francisco and was founded in 2011 by Bill Harris, the former CEO of PayPal and Intuit.
If you have many investment accounts, you'll appreciate the dashboard of Personal Capital.
It lets you easily view your portfolio balance and aggregates your portfolio performance. Personal Capital also provides projected portfolio values & net worth, retirement forecasting, and a personal evaluation to help you stay on track with your goals.
You can set a monthly budget target and view your spending according to categories, single transactions, or a comprehensive overview.
We recommend using Personal Capital in conjunction with something a bit more detailed like YNAB, because then you'll have both a granular perspective, but also a more long-term & all-encompassing view. They have a great article about why you should use Personal Capital with another like Mint or YNAB.
Mint Might Be Best For You If: You want a hands-off, basic and free budgeting tool.
Mint is a robust and friendly option for beginners who are just getting started.
Mint is more suitable as a free budgeting platform.
There is more focus on managing debt and budgeting, with less emphasis on investment management or retirement planning tips.
When it comes to Mint vs. YNAB, Justin prefers YNAB because of its ease of use with auto-filled categories, intuitive app design, location feature, and more.
Excel Might Be Best For You If: You worry about app security measures, and enjoy inputting all of the numbers in by yourself.
Excel is another option if you're looking for something simple that you can manage on your own.
It's also a good option if you worry about the security measures and privacy policies of popular mainstream apps, and would prefer not to digitally sync your bank and other account details.
While it's a flexible option, you'll have to spend more time manually keeping track of checks and credit card charges and all your other transactions. Apps like YNAB take the pain out of this process.
There's also a chance that you'll make an error or mess up an important formula on the spreadsheet, which can make a serious dent to your tracking or budgeting goals.
6. Paper and Pen
Paper and Pen Might Be Best For You If: You value privacy in the digital age and enjoy a reliable, old fashioned approach.
Zina Kumok with Money Under 30 shares why using pen and paper is a fun and active way to handle budgeting and expense tracking.
Writing goals down makes numbers more real, and physically writing down what you spend each day can have a bigger emotional impact than simply swiping a credit card and having the transaction turn up digitally on a screen.
If you enjoy being creative, using a bullet journal for budgeting lets you design your goals in a fun and interactive way. You can customize the pages according to your changing needs and goals.
Like Excel, using pen and paper is also a good option if you don't feel comfortable giving credit card and bank information to a budgeting site or app, but you'll spend a lot more time trying to keep it accurate. You'll also need to be vigilant in keeping it up-to-date — you won't have the automatic notifications from YNAB whenever you spend or earn money.
We hope this overview of budgeting tools inspires you to check them out to see which one is best for you.
The software with the fanciest design isn't going to be a good fit if it doesn't match your preferences and goals. Likewise, pen and paper isn't going to work if you fail to diligently record your expenses day in and day out. Browsing and trying out different options will help you get a better feel as to the tool(s) that will help you get results.
Justin's Recommendation: Do our extended free trial with YNAB to get a feel for it and set up an account with Personal Capital since that's free. When the trial of YNAB is ending, you'll have a good amount of experience to know what works best for you.
Remember to stay consistent and persistent to get the most out of your favorite money tracking approach!